Its implementation will disrupt operations and affect recovery, while another 200,000 SMEs are expected to temporarily or completely shut by end-October

by NUR HANANI AZMAN / pic by TMR FILE

THE SME Association of Malaysia has expressed its strong opposition to any suggestion of the Goods and Services Tax (GST) implementation next year, particularly with the proposed 4% tax rate.

The association said it will not only disrupt business operations, but also add costs and affect the recovery of businesses.

National president Datuk Michael Kang said the association acknowledges that GST is a much better tax system than Sales and Service Tax (SST), but it is not the right time to introduce the tax as the group does not foresee business recovery to happen in 2022.

“We should learn from the bad experience with 2015’s GST. The government should only consider the implementation of the GST when our economy recovers, possibly in 2023 or 2024,” he said in a statement yesterday.

The SME Association, with its 20 branches across the country, also suggested that the tax rate should start at 3% instead of 4%, as proposed by some parties.

Based on the association’s recent survey on SMEs Survival and Business Impact under the National Recovery Plan (NRP) that ended on Aug 20, 2021, 25% of small and medium enterprises (SMEs) have discontinued business operations, while 54% had either closed temporarily or ceased operations.

In terms of the SMEs’ performance last year compared to 2019, only 4% increased, 8% experienced no change, while 88% declined in performance.

On their performance in May, June and July this year, only 2% of businesses rose, 7% saw no change and 91% experienced performance decline.

“Forty-five percent of businesses will consider temporary or permanent shutdowns if they could not start operations immediately, while 58% plan to lay off at least 30% of their employees if businesses are not allowed to operate under the NRP.

“Meanwhile, 48% agreed with the government’s recent decision to start relaxing certain restrictions on fully immunised individuals,” Kang said.

He added that the Wage Subsidy Programme (WSP) has been the most beneficial programme under the 2021 Pemulih or National People’s Wellbeing and Economic Recovery Package.

The survey results indicated that most SMEs are in a most vulnerable stage and are likely to shut down if the economy remains closed.

SME Association national VP Chin Chee Seong said from the results of the indicative survey, another 200,000 SMEs are expected to temporarily or completely close their operations by the end of October.

Chin urged the government to focus on helping small and medium businesses recover as quickly as possible, rather than adding to their burden and creating difficulties for their businesses.

He believed that attention should be given to efforts in the fight against inflation, lowering the cost of running a business, the reduction of raw material and the suppression of the increase in transport and air cargo costs.

“The sooner SMEs get back on track, the more jobs will be created and the unemployment problems will be mitigated.

“I strongly suggest that the government look into providing more aids such as waiving the 2021 income tax and business licence fees, additional three months bank moratorium with free interest, 50% rental subsidy for retail SMEs, 50% electricity subsidy for affected companies, additional three months for the WSP and incentives for SMEs to restart their business with extra hiring subsidies,” Chin added.

With SMEs in need of help to cope with the current pandemic and faltering financial situation, the association called on the government to take immediate steps to save the economy and ultimately, the people.